Kritika 
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This is good news for people who earn a salary in India’s tech hubs. In addition to Ahmedabad, Bengaluru, Hyderabad, and Pune have been included in the list of cities where you can avail 50% House Rent Allowance (HRA) exemption under the Income Tax Rules, 2026. Those who pay rent in any of these cities can now avail of a great tax exemption on rent on their rent receipt issued in May. Everything you need to know to claim it properly.
What Changed and Why It Matters
But earlier, the 50% calculation of HRA was only there for the residents of Delhi, Mumbai, Chennai and Kolkata. The 50% rule has been extended to Bengaluru, Hyderabad and Pune under the new Income Tax Rules, 2026, with the rationale of the steep increase in rentals in these metros. This will directly boost the House Rent Allowance exemption that salaried folks in these cities can claim, if they are under the old tax regime.
The Three-Way HRA Calculation: Which Number Wins?
The lowest of the three of these amounts is the amount of income tax rent deduction you can claim:
- Actual HRA received from your employer
- 10% of your basic wage net of the rent paid.
- 50% of the basic salary (which now applies to the new metros)
The 50% rule will only provide better HRA tax benefits if your rent is significantly higher than 10% of your base salary. Before filing, use the JM Financial Services HRA Guide to make your actual numbers.
Step-by-Step: How to Claim the Extra Tax Exemption on Rent for May
Step 1: Confirm Old Tax Regime Eligibility
An exemption for HRA is only applicable to the old tax regime. If you have availed the new tax regime, then the rent allowance tax rules are not applicable to you, and you will not be able to avail the HRA deduction. If this is a concern, switch regimes prior to May TDS processing.
Step 2: Work out your precise HRA limit
Use the following three-way calculation but for May. When it comes to your income tax, the rent amount that you enter is whichever is lower, so you don’t want to under or over-claim the rent.
Step 3: Get Your May Rent Receipt Right
To be valid, your rent receipt documents should contain the following:
- Date: Clearly marked as May (month and year)
- Rate: The monthly rent per unit.Units: Number of units rented.
- Landlord Information: Landlord’s name and address.
- PAN Card: In case annual rent exceeds ₹100,000 (i.e., ₹8,333 per month), then it becomes mandatory to furnish PAN Card of your landlord.
- Revenue Stamp: In case you make payment in cash and rent is more than ₹5,000, then Revenue Stamp needs to be attached along with signing.
In case any of the above information is not available in the receipt, it would lead to rejection of your rental receipts either during processing of payroll or while verifying your ITR, resulting in loss of further tax deduction/exemption.
Step 4: Report Family Rentals
The Income Tax Act, 2026 has included one more compliance requirement for individuals who are parents/spouse of the owner and are renting out their home. The new condition is that the relationship with the parent or spouse must be made mandatory while filing an HRA declaration. It is also necessary to show that rent is actually being paid and that the landlord is accounting for it as such in his/her ITR. If you don’t provide this information, 100% of your rent receipts tax exemption may be disallowed.
Step 5: Give Your Employer Form 124
The new rules have replaced the old Form 12BB. Send the rent receipts for May to your company HR/payroll department for TDS. Always watch the timing; the deduction may not be received if it is issued late and will have to be adjusted during the ITR stage.
Step 6: Reconcile During ITR Filing
At the time of filing ITR, make corresponding adjustments if any difference is found between the declared figures to the employer and the figures in the final ITR. If you submit a rent receipt tax claim on your employer declaration and return, you should be consistent so that you don’t get notices.
Quick Checklist for Salaried Employees
Go back to the old taxation system
HRA deduction or tax exemption does not apply if you opt for the new tax regime.
Do a 3-part HRA calculation
Make sure that you claim the right exemption amount and save on tax deductions.
Get a well-formatted receipt for the paid rent
Proves that you have paid rent and helps in claiming tax exemption.
Give your landlord’s PAN number if annual rent exceeds ₹1 lakh
Required under tax laws to claim HRA tax exemption.
Mention if the landlord belongs to your family
Important due to the latest guidelines for compliance.
File Form 124 prior to the payroll deadline
This way the exemption will be calculated while paying May rent.
Bottom Line
One of the most significant changes to HRA tax benefits in recent times is the applicability of the 50% rule to cities like Bengaluru, Hyderabad, and Pune. Now, those who pay a significant amount of rent in these cities have a legitimate avenue to get a bigger tax exemption on rent (if the paperwork is completed correctly). Prepare your rent receipt for May and submit your Form 124 on time, and make sure that your landlord’s PAN is registered. Some time spent now can mean real income-tax advantages at the time of filing the return when it comes to rental income.
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